Air-India to introduce cut-fare charter flights to West European countries

Two ostensibly unrelated announcements in a space of 15 days made it clear that the Government was finally coming to terms with tourism, traditionally given the lowest priority in Indian planning.

The first announcement, pertaining to the withdrawal of the controversial 15 per cent Hotel Receipts Tax (HRT) came at the tail-end of the Finance Minister Pranab Mukherjee's budget speech. The second announcement proved a complete surprise, when Air-India declared that it would by the year-end introduce cut-fare charter flights to West European countries and possibly to Japan and South Korea. The change comes at a time when the severely flagging tourism industry - its growth rate has dropped from 16.8 per cent in 1978 to a miserable 4.9 per cent last year - requires a break.

Imposed last year, in a fabian attempt at curbing luxury consumption, the HRT was levied on any hotel which charged over Rs 75 for a single room, effectively covering every quality hotel in the country The tax applied to every service offered by the hotel, and hoteliers around the country promptly upped the ante on everything from room tariffs to food and beverages.

Added to individual luxury taxes imposed by many states, including Maharashtra, Uttar Pradesh and Jammu & Kashmir, the hike in hotel prices worked as an effective deterrent to the budget tourist from abroad.

Already heartened by the fiscal relief, delegates at the annual conference of the Travel Agents Association of India (TAAI) at Madras in mid-March were told of the charter plan by Air-India Commercial Manager, Captain M.S. Kohli who estimated that by September, Air-India would be able to begin charter flights from Milan, Turin, Madrid, Zurich and possibly even Japan and South Korea.

Risks: Air-India's argument against charters was that they would lead to lowered profitability: when an entire plane-load flies at a cut-rate charter fare, the yield per passenger is considerably lower than that obtained from a mix of first class, full-fare economy and concessional excursion passengers on the scheduled flights.

An even greater deterrent was the fear that the availability of charter flights would lead to what is termed in airline jargon as a "dilution" of revenue - when passengers who would normally buy a high-yield ticket on a normal flight instead go in for a cheaper charter fare, depriving the airline of revenue. At a time when the airline was staggering along on marginal profits due to the oil price boom, it was in no position to risk its established markets with a shift towards charters.

With the growing pressure on the Tourism and Civil Aviation Ministry to deliver the goods, Air-India had no option but to drop its economic arguments and get down to the serious business of promoting tourism. Sri Lanka, only half the size of Tamil Nadu and possessing only a fraction of India's tourism resources, caters to over 4 lakh tourists annually, compared to India's 8.5 lakh.

Thailand, not much better placed for tourist attractions, has nevertheless overtaken India in tourist traffic, and continues to grow rapidly. Both countries are served by regular charter services which bring in year-round, back-to-back package groups.

Said M.K. Sanghvi, the diminutive managing director of Sanghvi Travels, who retired, last fortnight, as president of TAAI: "The advantage they have over us is the cheap charter fares. A package holiday to Colombo or Bangkok costs only a little more for a European than a holiday in Europe itself."

Travel agents and the hotel chains tend, not entirely without justification, to blame Air-India for the high price of India's charter packages. The projected Madrid-Delhi-Madrid charter flight by Air-India will cost each passenger $495 (Rs 4,455); the Amsterdam round trip will cost $478 (Rs 3,942). A British Airways charter from London to Hong Kong, almost one-and-a half times the distance, costs a mere $400 (Rs 3,600).

However, in fact, it is not only Air-India which threatens to push package prices over the realm of realistic competition. While the air fare accounts for roughly 40 per cent of a standard charter deal, hotels and ground handling account for anywhere from 45-50 per cent.

And hotel tariffs in the country, in recent years, have shot up so high that they are only competitive with those in the most expensive cities in the world. Prominent hotel chains in Delhi and Bombay, the gateway cities, today cost as much as comparable hotels in Singapore, London, and even Tokyo.

Resort hotels at beaches, with prices in the $20 - 30 (Rs 180 - 270) range, are at least $10 (Rs 90) more expensive than comparable hotels in Thailand or the Maldives. And the hotels of Agra, Jaipur and Udaipur (known as the golden triangle of Indian tourism), although they cost as much as their Sri Lankan counterparts. have few of the facilities offered across the Palk Strait.

Image Change: Possibly more crucial than the price of the Indian package is the fact that India is still not seen as a common man's holiday destination. Unlike Bangkok, which is visited as much for its massage parlours and shopping as for its tourist sights, India has traditionally been sold to westerners as a highbrow destination cluttered with historic sights and ancient culture.

But this image, feel travel industry men, is not what the average bus driver or bank clerk is looking for on his annual holiday. "They want a holiday which is fun," says Shashi Rege, Bombay branch manager for Sita Travels, "we have to create a holiday atmosphere of wine, women and song if we want to really cash in on the huge charter traffic of lower class travellers."

While that may be an illusory goal, and the parties to the charter debate recriminate with each other and continue to fight for a larger share of the cake, plans for the first charier flights are steadily being finalised. Air-India, last fortnight, drew up letters of intent for the purchase of three new Airbus craft, the first of which will be delivered by end-September.

At least one of these is expected to be pressed into charter services, and part of the airline's ageing fleet of Boeing 707s will be used too. Since any country Air-India lifts charters from will demand reciprocal flying rights, the year-end should see Spain's Iberia and Avianco Airlines, Japan Airlines and a South Korean airline bringing in plane-loads of passengers too.

Although the charters will initially concentrate only on Delhi and the golden triangle, since this region will have a huge excess room capacity after the Asiad, they are eventually expected to take passengers directly to resorts like Kashmir, Goa and Puri. All of which should provide a shot in the arm for Indian tourism.

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